The term ” Internet of Things” has been a hot topic in recent years. What is IoT? Basically, it is a network of smart devices which are connected to each other and internet. For example, your cellphone, digital pads, smart lights, smart cars, fridge and other smart appliances would be connected through the network and your will be able to activate commands to whichever things your intend to and perform the task it is asked to do. It is not from a science fiction; it is the way our technology is going to advance to. Researchers believe there will be around 34B smart devices in use in the world by 2020. IoT will not only benefit our homes but also across industries. There are a few IoT related companies on our watch list such as: Microsoft, Blackrock, Amazon, Alphabet Inc., Facebook, Apple, Skyworks. If you are looking for some long term investments in IoT, these are some of the safe bets we recommend.
P.S. I have positions in Facebook and Amazon.
Technology has advanced extremely fast in the last decade. We all benefited from the convenience that was created by technology. However, nothing is perfect; it also comes with bad things from time to time. There have been a couple very serious malwares attacks around the globe so far in 2017. WannaCry and Petrwrap were two malwares responsible for these attacks. Basically, they took computer systems hostage and asked for ransom money. The victims are spread around the globe and across different industries, including banking, transportations and governments etc.
More people than before recognize the importance of cyber security. It is not a bad time to invest into some of the cybersecurity firms in the market. FireEye Inc. (FEYE) is on our investing list. It provides products and services to prevent advanced cyber threats. It has some ups and downs in the last two years. It is currently trading at $15.60/share. It has performed pretty well this year. The sales revenue was up 3% from previous Q. It is up about 29% year to date. Its total debt is around $750M. However, the debt could easily be covered by its current assets, which are around $1080M. In a market expected to be worth $232B by 2022. There is still huge growth potential for companies like FireEye Inc. For cautious investors, you can still wait and see after the Q2 ER, which is coming out on August 1st.
Check Point Software Technologies Ltd. is also on our watch list. It will be further discussed in the future post.
P.S. I have a position in FEYE.
Lately I have been digging further into corporate finance. It is interesting to see how mergers & Acquisitions ( M&A ) work and the impact that has on the company. In 2017, One of the biggest deal was Amazon bought the Whole Foods for $13.7 billion in cash. The deal values Whole Foods at $42/share. Shareholders of Whole Foods enjoyed a $9 jump after the deal. How would this deal help Amazon? Retailing industry has been struggling in recent years due to online competitions and some companies are lacking the awareness of technology advancement, ultimately these companies disappeared. Back in 2015, Mr.Ma, CEO of Alibaba Group. mentioned that the combo of online retailing and physical stores are going to be the mainstream of retail world in the future because of the use of big data. You would not survive with only online platforms or physical locations. As I mentioned in the other post, big data is going to be the most valuable resource of the business world. Amazon’s deal fit perfectly with this formula. It has the largest data resource in the world. This would provide the exact information needed for its physical stores; in this case, the Whole Foods chain would be able to know what kind of inventory they should carry in the right location; what type of groceries that they should be invest in due to customers’ purchase patterns. As a result, company would minimize opportunity cost by analyzing big data.
What happen to the stock prices of companies that are involved in the M&A? Usually, there’s a short term effect on both companies. Generally speaking, the acquiring company’s stock price would fall due to uncertainties of the purchase. It creates concerns about that if it is a good buy among its shareholders. On the other hand, the targeted company’s stock price would rise because the acquiring company usually pays a premium for the acquisition.
There are a lot of cross boarder M&A so far in 2017 as well. I would love to dig further into them in the future posts.
It may have a high entry point now but Amazon is still a buy for me:) Could also wait and see potential dip later on.
P.S. I have a position in Amazon.
CryptoCurrency is gaining popularity among traders in the past few years. Bitcoin and Ethereum are the top 2 cryptocurrencies with market capital around $40B and $26B accordingly. Cryptocurrency is extremely volatile, therefore it is only recommended to traders with higher risk tolerance. Bitcoin vs USD was around $800 in the end of 2016. As of today, it is valued at around $2500 USD . Cryptocurrency is still very new to a lot of people. Its decentralized nature worries a lot of professionals and governments. A lot of big banks, accounting firms and governments do have their research on this newly digital cash system. However, They are not mainstream as non of these digital currencies are officially recognized by any governments nor any exchanges. They can only be traded on certain digital currency online platforms and applications.
To be honest, it is still too risky of an investment. If you really want to give it a try please invest with caution and maybe with your spare changes. Please never invest with your life savings and know your priorities. I do not have any positions in any of the digital currencies. We will keep an eye on any future developments:)
Tech has been the most money generating sector the past decade. Especially, semiconductor companies are the trend setters in this segment. Soon if not now, data will become the most valuable resource in the world. Data computing and processing power is in high demand in the business world. That is where semiconductor companies come in. Personally, I like NVDA, AMD and INTEL in the segment. NVDA and AMD have been on a tear since last year. NVDA was around $29/share in Jan.2016 and it is $152/share as of today. It has become a dominant player in datacenter thanks for its high power GPUs in deep learning. Meanwhile, AMD is trying to catch up with NVDA and INTEL in marketshare. As one of the top gainers in S&P 500, AMD is getting some momentum with their new CPUs and GPUs line-up this year. The new Apple’s iMac Pro will be equipped with AMD’s new Radeon Pro Vega GPU and is set to be one of the fastest all-in-one machines available in the market. The tech sector has suffered a selloff during the past few days, a lot of tech stocks price dropped around 5% to 10% accordingly. However, I am still bullish and liking the potentials of these companies mentioned above. For long term investors, there should not be any panic over the past few days. Big data is the way to go in the foreseeable future.
P.S. I have a position in AMD as of today. May look into re-entry to NVDA in potential dip.
Moody’s downgraded China’s credit rating from A1 to Aa3 last week. However, there was not much impact to the market. Chinese banks are still very strong as well as real estate tycoons in China. To be honest, Aa3 rating is still very good compare to most of countries in the world. Investors don’t need to be panic over it. Speaking of Asian market, Himax Technologies (HIMX) is one of the companies that attracted my attention. It is a manufacture of display drivers for LCD screens. Most of its market shares are in Asia. Its performance is not particularly impressive in past couple of years. The company has changed its strategy and invested heavily into AR/VR components manufacturing and 3D sensors. AR/VR market is expected to grow to $85 billion by 2020. Personally, AR/VR is going to gain momentum into mass population in the future. You may not see any immediate returns on HIMX. I’m still bullish in the long term.
P.S. I have a position in HIMX
What happened to AMD? Advanced Micro Devices Inc. published its Q1 earnings report after market closed on Monday. They increased revenue by 18% compare to last year at $984 millions, which is about $400K shy from wall street estimated figures. Also, earning per share increase to -$0.08 from -$0.14 a year ago. However, AMD’s value dropped 24% since Q1.ER. It’s about $10.11 per share as for today. What’s going on with AMD? AMD is one of the hottest stock in 2016, but a lot of the hype was from investors’ expectation. AMD’s earnings is not bad at all compared to previous year, it is just that wall street and investors have much higher expectation than that. As a result, its share price took a hit. There was also some panic selling contributed to it. I’m still very bullish to AMD in a long term perspective. Vega, its high end GPU is coming out in the end of June. Also, AMD’s server CPU Naples is due to launch some time in Q2. There are a lot of activities going on. AMD recently bought a small VR company which is specialized in wireless technology in VR. They have also been working on AI/Deep learning sector. There is no doubt that AMD is going to be valuable in the long run.
P.S. I have positions in AMD.
What’s ETF? Have you ever purchased a basket of apples in a supermarket? Similarly, ETF is a basket of assets such as: stocks, commodities or bonds. Simply put, it can be also traded in an exchange just like a stock. Investors of ETFs get paid from earned interest or dividend. ETF is less volatile than stock because of its diversified portfolio characteristic. As a result, you won’t see any short squeeze like some stocks may have. It’s friendly for investors who are looking for less risky investment. ETF is usually to focus on a particular market index. However, there is a large range of ETFs you can choose from in the market right now. It may be difficult to choose a good one. Personally, I still liking the tech sector. Here are two of the ETFs I’m looking at: PowerShares Dynamic Semiconductors ETF and iShares S&P/TSX 60 Index Fund.
P.S. I don’t have any position in any ETFs at the moment.
I came across this interesting work-in-process IPO a few weeks ago. Saudi Aramco is one of world’s most valuable companies based in Dhahran. Its value is estimated somewhere between US$1.5 trillion and US$10 trillion. It is said that JP Morgan Chase & Co, Morgan Stanley and HSBC will be the underwriters to this IPO. It is eyeing on listing on New York, London and Toronto as for now. I won’t be surprised if they add another listing somewhere in Asia since the Saudi government is really interested in getting more Chinese investors involved. A lot of i-banks have their eyes on this super profitable opportunity. If anyone could even get into an advisory role of a piece of the pie, its potential financial gain would be huge. The company itself is closely related to Saudi government, moreover, economically it also contributes a lot to public sectors in the country, therefore the complexity of restructuring is huge. There are still a lot of work need to be done before it can go public. I would say we have to wait until at least the end of 2018 or sometime in 2019 to see it happening. This is definitely going to be the biggest IPO to date when everything is said and done. We will keep an eye on any updates in the future.
Dryships Inc is a bulk shipping company base in Athens, Greece. This is a stock which you should definitely stay away from if you are a value investor. It has had 4 reverse splits since last year. Simply put, if you had a position at the beginning of 2016, you would had lost 98% value of your holding by today. According to its owner, they have bought 4 new ships for $121 millions at the beginning of 2017. Free cash flow is about 1.43M as of December 2016. The stock has been in $1.6 range since March 01, 2017. The company has about 140M in debit the end of 2016. Shipping stocks are very volatile in general due to its cyclicality. For day traders might be a good chance to short.
Federal Reserve are expecting to make a decision about rate hike at 2pm eastern time today. If the rate is increased as expected, banking sectors and some other financial services companies could be benefited. Manulife Financial Corp.(MFC) is one of my picks. It has a steady growth rate from both of its businesses in Asian and North American markets. It’s bullish for long term investor.
P.S. I still hold a small position in DRYS T.T.